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Last Updated : Aug 11, 2016 06:09 PM IST | Source:

Buy Adani Power; target of Rs 34: Axis Direct

Axis Direct is bullish on Adani Power has recommended buy rating on the stock with a target price of Rs 34 in its research report dated August 10, 2016.

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Axis Direct's research report on Adani power

Adani Power's (APL) Q1 EBITDA at Rs 19.2 bn was in line with our estimate. Low fuel cost/unit (down 13% YoY/ 5% QoQ) offset weak generation (down 4% YoY; 11% QoQ) due to non-availability of water at Tiroda and low demand. Lower interest cost (Rs 14.5 bn vs. Rs 15.5 bn QoQ) led to a better PAT. Taking cue from favorable APTEL order APL recognizes compensatory tariff for other plants as well: Citing similar grounds, APL has recognized compensatory tariff of Rs 0.4 bn for other Mundra plant PPA which were not part of APTEL ruling. However, we have not incorporated the compensatory tariff into our estimates and would do so only after the final outcome.

Resolution of PPA-related disputes holds key to improvement in cash flows along with improvement in domestic coal supplies. We maintain our estimates and TP. Due to sharp correction in the stock, we now have a BUY rating on APL (HOLD earlier). We model a turnaround in APL's earnings from FY17 on – (a) improved domestic coal supplies, (b) higher PLFs and (c) cash flows from tariff hike.

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First Published on Aug 11, 2016 06:09 pm
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